As predicted in my 2010 article “The Facade of FCPA Enforcement” other nations would soon start to salivate over alternative resolution vehicles because they are easy, efficient and yield a greater quantity of enforcement actions allowing them to “catch up” to the U.S. in terms of “enforcing” bribery laws. This is precisely what happened in the U.K. and France and is happening in Australia and Canada.
Recently, the Canadian government released this document titled “Expanding Canada’s Toolkit to Address Corporate Wrongdoing: What We Heard.” As discussed below the document is laughable in certain respects and otherwise fails to capture several salient points relevant to Canada’s movement towards DPAs.
In pertinent part, the document states:
“The majority of participants supported having a Canadian DPA regime, as they were of the view that DPAs could be a useful additional tool for prosecutors to use at their discretion in appropriate circumstances to address corporate criminal wrongdoing. They were of the view that DPAs could result in effective, proportionate and dissuasive sanctions, while also meeting other objectives, such as helping to identify corporate and individual criminal liability (for example, by encouraging self-reporting and requiring corporate accused to identify implicated individuals for prosecution purposes); enhancing compliance and improving corporate culture; and reducing the potential negative impact of a conviction on innocent third parties. Some, however, did not think that there is a demonstrable need for DPAs. They and others were concerned that DPAs could be viewed as favouring large companies over small companies and individual offenders.
Feedback was received from a variety of participants across Canada, including industry associations, businesses, justice sector stakeholders (including law enforcement) and non-governmental organizations (NGOs), and academics. Government officials held over 40 meetings with approximately 370 participants to listen to views on the consultation topics. The Government of Canada received 30 online submissions related to potential enhancements to the Integrity Regime and 45 submissions on the possible adoption of a DPA regime in Canada.
A plurality of submissions regarding DPAs were provided by business (47%); the remaining submissions came from individuals (26%), the justice sector (including law enforcement) (20%), and NGOs (7%).”
Let’s pause here for a second. Is it any surprise that the “majority of participants supported having a Canadian DPA regime” when approximately 50% of the submissions were from business? Of course business favors less harsh criminal sanctions.
As indicated above, an additional 26% of submissions can from individuals and it would be great to know what percentage of those submissions were from individuals associated law firms, accounting firms and others that stand to benefit from more “enforcement” of Canada’s Corruption of Foreign Public Officials Act as well as the expected post-enforcement action compliance obligations and reporting requirements.
Elsewhere, the document states:
“The majority of participants (particularly those from the business sector) thought that DPAs could be useful and cited advantages [… including …] the benefits of having a tool that avoided a binary (prosecute or not prosecute) outcome and that focused on rehabilitation rather than on punishment. Possible justice system efficiencies were also mentioned, along with facilitating victim restitution, where appropriate. Others did not support DPAs as they were of the view that there was no demonstrable need for them in Canada. A number expressed concerns that a DPA regime would give too much discretion to prosecutors and could compromise public confidence in the justice system. Related to this was a concern expressed by some that DPAs could be seen as favouring large companies over smaller companies and individual offenders. Of the responses that compared a possible Canadian regime to the U.S. policy-based regime and the UK statutory regime, most favoured the UK model for reasons of transparency. It should be noted in this respect that Australia introduced its own DPA legislation on December 6, 2017 and the first arrangement has been entered into under France’s recently enacted DPA-like regime.
Participants were asked for their views with respect to the potential advantages and disadvantages of using DPAs to address corporate criminal liability in Canada. This issue received the most attention from participants, with the majority taking the view that the advantages of having a DPA regime would outweigh the possible disadvantages.
The majority of participants thought that a DPA regime would encourage self-reporting, promote accountability, foster a compliance culture and enhance public confidence in addressing corporate wrongdoing. A DPA regime is also viewed as a means to improve enforcement outcomes and could increase justice system efficiencies by avoiding protracted criminal trials. The extent to which DPAs would encourage self-reporting is dependent on the predictability of the outcome, which in turn is linked to how the DPA regime is structured. While there is little judicial involvement in the US DPA process, under the UK regime, the courts must find that the terms are fair and reasonable. This adds a degree of uncertainty, as the court could require that changes be made or may not approve the DPA at all. Several participants noted that DPAs provide greater flexibility for prosecutors to structure tailored resolutions in appropriate cases, while reducing the negative consequences of a company’s conviction for innocent third parties, such as employees. Other cited advantages include that DPAs may: help Canada put in place a tool for prosecutors that is available in other jurisdictions; provide an alternative means of holding a corporation accountable for misconduct, while avoiding the legal and reputational harm that could result from prosecution and conviction; and facilitate the more timely payment of compensation to victims
There was a sense among some participants that instituting a DPA regime could give companies a false sense of security as they might consider that they would not be at risk of prosecution, but could, rather, “buy their way” out of trouble through the payment of financial penalties rather than being held accountable by a court of law. If this were to be the case, it could weaken the deterrent effect of the criminal law on corporations and ultimately undermine public confidence in the criminal justice system. Further disadvantages that were identified include that a DPA regime may: shield employees who have played an active role in the misconduct by focusing enforcement on the company rather than on pursuing charges against individual offenders; allow corporate monitors too much leeway over their mandates, such that the terms of the DPA go beyond what was intended; result in wasted effort and resources and potentially compromise a subsequent prosecution in cases where significant time is spent trying, unsuccessfully, to negotiate a DPA. Some thought that providing more investigation and prosecution resources would be more effective than adopting a DPA regime in addressing a possible perception that commercial crime and corruption are not sufficiently investigated and prosecuted in Canada.
The majority of participants favoured the UK model, which provides for strong judicial oversight throughout the DPA process. This would include the need for the courts to review the draft DPA to ensure that it is in the public interest and that its terms are fair, reasonable and proportionate. The court should also be involved in variance and termination determinations. Viewing DPAs principally as agreements between the prosecutor and the accused, a few participants thought the role of the court should be limited (for example, to serving as a repository for DPAs). A smaller number of participants indicated that the courts should be given an even broader oversight role from negotiation to conclusion of the DPA, with a regular review function. Others cautioned that a close supervisory role from the courts would place an unnecessary burden on court resources, and may be more appropriately handled outside of the court system. One written submission was supportive of the U.S. model, where DPAs are registered with the court for enforcement in the event of a breach.”
In closing the document stated:
“The Government of Canada will further review the feedback received and assess whether enhancements to the Integrity Regime are warranted to ensure that the Regime continues to achieve its objectives, is efficient in doing so, and addresses new trends and risks in a constantly changing marketplace. Feedback will also be used by the Government of Canada in considering the possibility of introducing a Canadian DPA regime as an additional tool for prosecutors, to be used in appropriate circumstances, to address corporate crime. While this public consultation has ended, the Government of Canada remains committed to hearing from interested parties regarding both the Integrity Regime and DPAs.”
As stated in my submission there is really no evidence, indeed the evidence suggests the contrary, that DPAs would – in the words of the Canadian government – “encourage self-reporting, promote accountability, foster a compliance culture and enhance public confidence in addressing corporate wrongdoing.”
Consider the following from the U.S. experience with DPAs (and other alternative resolution vehicles).
The DOJ has been using DPAs (and other alternative resolution vehicles) to resolve alleged instances of corporate FCPA liability since 2004 and have long encouraged business organizations to self-disclosure FCPA conduct. Yet there is no evidence that DPAs are encouraging self-disclosure. Indeed, the DOJ’s launch of an FCPA Pilot Program in April 2016 was largely motivated by the DOJ’s recognition that its long-standing efforts spanning over a decade (including through use of DPAs) to motivate self-disclosure were not successful. In the words of the DOJ’s then Assistant Attorney General for the Criminal Division, the goal of the pilot program is to “encourage self-reporting” because companies have information about individuals who have violated the FCPA and have documents relevant to FCPA violations. If DPA’s encouraged self-disclosure as the Government of Canada asserts, there would have been no reason for the DOJ to unveil the FCPA Pilot Program in April 2016. And if the FCPA Pilot Program was encouraging voluntarily disclose, why the need for the DOJ to once again revamp its FCPA corporate enforcement policy as it did in November 2017 (see here) to further motivate voluntary disclosure?
Deterrence and Accountability
There is no reliable evidence to suggest that alternative resolution vehicles used to resolve alleged FCPA offenses has enhanced compliance or the accountability of business organizations resolving such offenses. Indeed, the Organization for Economic Co-operation and Development (“OECD”) report on FCPA enforcement observed that the “actual deterrent effect [of NPAs and DPAs] has not been quantified,” and it requested that the U.S. “[m]ake public any information about the impact of NPAs and DPAs on deterring the bribery of foreign public officials.”
The DOJ’s response to this request stated:
“Scholars have recognized that quantifying deterrence is extremely difficult. This is equally true for the deterrent effect of DPAs and NPAs. Thus . . . measuring ‘the impact of NPAs and DPAs in deterring the bribery of foreign public officials’ would be a difficult task, save providing certain anecdotal and other circumstantial evidence. One of the best sources of anecdotal evidence demonstrating that DPAs and NPAs have a deterrent effect comes from the companies themselves. The companies against which DPAs and NPAs have been brought have often undergone dramatic changes.”
Moreover, the assertion that DPAs deter and/or increase compliance is undermined by the fact that several companies that resolved alleged FCPA offenses through DPAs (Aibel Group Ltd., Marubeni, Biomet, Orthofix, etc.) have since become FCPA repeat offenders or are currently under FCPA scrutiny yet again.
In short, given the nature of the responses received the finding that “the majority of participants supported having a Canadian DPA regime” is laughable and the recent report by the Canadian government otherwise fails to capture several salient points relevant to Canada’s movement towards DPAs. In any event, as I previously stated many times, if a country is to have a DPA regime, the DPA regime in other peer countries is far more sound compared to the U.S.
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